NCSSF to issue licences for fund managers
By Sun Min (China Daily)
Updated: 2004-06-15 08:54

The National Council of Social Security Fund (NCSSF) is selecting new fund managers to put assets into securities investment.

It is the second time that the council has chosen professional fund managers to help with investment, following a first attempt 18 months ago. About 30 fund management companies, securities houses and trust firms in China, including joint ventures, are to bid for the licences.

NCSSF has sent out an inspection team to major southern cities including Shenzhen and Shanghai to examine local companies that are likely candidates for the council's new fund managers, an informed source said.

"Right now the delegation is in Shanghai, but I believe it should come back to Beijing and start inspecting Beijing companies soon," the source said yesterday.

All the candidates have to first pass initial examination of their qualifications. They then have to file applications and undergo interviews before they can acquire licences.

By the end of last year, NCSSF operated 132.5 billion yuan (US$16 billion) of social security funds, a strategic reserve to help cover future social security expenses in China.

It has been seeking wider investment channels other than bank deposits and treasury bonds to get higher returns.

In December 2002, the council chose six domestic fund management companies to be fund managers and help it conduct securities investment. It authorized all together 14 billion yuan (US$1.7 billion) worth of assets for the companies.

The rules covering the situation say the candidates should have a minimum two years of business experience in asset management, with good operation records and reputation. The provision thwarted some new companies in 2002.

The six winners at the time, including Boshi, Penghua and Harvest, were among the first batch of fund management companies established in China in 1998 and 1999.

But as time goes by, more institutions have met the criteria and foreign businesses are also muscling in.

"We are very interested in the social security fund management programme," said Walter Lin, President and Chief Executive Officer of ABN AMRO Xiangcai Fund Management Co, a Beijing-based joint venture between Netherlands-based ABN AMRO and China's Xiangcai Securities Co.

"We have made the relevant preparations and are ready to take part in the bidding," he told China Daily yesterday.

"We are confident of our strength," he said.

Several other joint venture fund management firms have also expressed interest.

As well, securities and trust firms are to take part in the competition for the asset management business of the central social security fund this time, though insiders said that fund management companies might have more advantage in expertise.

Presently, stocks account for about 5 per cent of the total assets under the control of NCSSF. The council plans to raise the ratio to 15 per cent this year, Xiang Huaicheng, chairman of NCSSF, said in April.

It is also about to trade overseas stocks and bonds, after acquiring State Council approval for overseas capital investment in February.

According to NCSSF statistics, the foundation reported a 2.71 per cent return rate in 2003, which was higher than the averaged return rate on treasury bonds and interest rates of one-year fixed deposits.

But critics say that such a return rate was still very moderate and the council and its fund managers should work for higher yields, with effective risk control.

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